UN cuts global growth forecast, blaming Middle East crisis

Global GDP growth is forecast to rise 2.5% in 2026 and 2.8% in 2027. The forecast was downgraded from earlier January projections of 2.7% and 2.9%. The downgrade is linked to fallout from the war on Iran, including higher energy prices after the closure of the Strait of Hormuz and volatility in financial markets. The shock is described as broader than an initial energy-market disruption, with uncertain scope, magnitude, and duration. The forecasts assume oil prices ease in the second half of the year and governments can mitigate impacts by using fuel reserves. In an adverse scenario, growth could fall to 2.1%. Developing countries face larger declines, and Western Asia is projected to experience the sharpest regional slowdown.

"Global gross domestic product (GDP) is expected to grow 2.5 percent this year and 2.8 percent in 2027, the UN's Department of Economic and Social Affairs said in its latest forecast on Tuesday. UN economists in January forecast growth of 2.7 percent in 2026 and 2.9 percent the following year. The UN's economic division cited rising energy prices due to the closure of the Strait of Hormuz and volatility in financial markets as reasons for the downgrade."

"Shantanu Mukherjee, director of economic analysis at the department, said what began as a blow to energy markets when the United States and Israel started the war on February 28 had turned into a broader supply shock of uncertain scope, magnitude and duration that is rippling across the world. Mukherjee said the forecasts assumed oil prices would begin easing in the second half of the year, and that governments would be able to mitigate some of the shock by tapping fuel reserves."

"In an adverse scenario, Mukherjee said, global growth could slow to just 2.1 percent, one of the worst performances this century outside of the COVID-19 pandemic and the 2007-2009 global financial crisis. Our numbers right now are coming with a significant amount of uncertainty, Mukherjee told a news conference. And uncertainty in and of itself is a significant drag on the economy."

"Mukherjee said developing countries have been hit hardest, with their growth this year expected to be 1.3 percentage points below the pre-pandemic average, compared with a 0.7 percentage-point decline for the global economy as a whole. Western Asia is projected to see the sharpest slowdown of any region in 2026, with the UN slashing its growth forecast from 4.1 percent to 1.4 percent."

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